A neighbourhood ISP?

"Oops!" is what Satyam Infoway, Dishnet Ltd or any other
major private Internet service providers (ISP) will exclaim if Karthik Iyer's business plan succeeds.

Iyer, director, OOPS India, Chennai, propounds that all that one needs to become an ISP (a neighbourhood ISP) is Rs 10 lakh, willingness to work hard and a bit of computer knowledge. Not Rs 1 crore, lots of computer knowledge and hi-tech gadgets, as it is popularly perceived now

Don't dismiss this as another fraud or sham like a grow-mushroom-and-get-rich business proposal. Before going into details of Iyer's model, a bit of his background could add weight to his theory.

A graduate from University of Minnesota, USA, Iyer, after a brief stint at General Mills, Sun Country Airlines, both in USA, came back home in 1995. "I knew what I didn't want to do in India! I didn't want to do medical/legal transcriptions; body shopping and such, which our esteemed software industry is actually doing now," he remarks.

That left him with the software product development field, which he ventured into by floating OOPS India. The first endeavour was to develop a video conferencing software on TCP/IP, which Iyer successfully completed in two years' time. Interestingly, it was the country's first video conferencing software product.

Today, OOPS India vends four of its own products: I See (video conferencing); I Talk (Voice over Internet Protocol); EN Mail (e-mail); I Dial (easy access to Net) and Chit Chat (chat software).

EN Mail has become a favoured product, not only with corporates but also with many leading web portals in the country. OOPS India also offers web designing and hosting services.

Getting back to his concept of the neighbourhood ISP, Iyer says that it is an attempt to demystify the ISP business and to present a scaleable architecture, so that the business as well as Internet connections grow rapidly like the cable TV networks in India. "I firmly believe that Internet in India can achieve organic growth only if there are lots of small ISPs, instead of few large corporate players."

His argument: "Small ISPs will provide personalised service and their response time, in case of complaints, will be quick, unlike the distant corporate ISPs."

Perhaps there's some truth in what he says. While many of us refuse to pay our cable operators if the transmission is not good, or for the period we go on vacation, the same cannot be said with regard to Net connections availed from large ISPs.

With the corporate ISPs' quality of service being as good/bad as that of VSNL, Iyer is in favour of neighbourhood ISPs with a subscriber base of 100 to start with.

"All you would need to become an ISP is the knowledge to install hardware/software into a PC and to work with it; three low cost Linux PCs; 64 Kbps ISDN line for backbone connectivity and eight analog POTS lines for subscriber dial in," he says. But why Linux? "Well, it is a fact that once Linux is commissioned, it is known to go on functioning for a fairly long period of time."

Speaking of the equipment configuration, he says that two of the low-cost PCs will act as primary and secondary servers for services like e-mail, domain name service (DNS), and other such services. There can be a terminal server with a multi-port modem card to handle eight simultaneous 33.6 modem connections with 64 Kbps ISDN backbone link.

And for the gateway connectivity, larger ISPs can be approached for the purpose and if they "act funny," our own dear VSNL is there. According to Iyer, for 100 subscribers, 64 Kbps bandwidth would suffice and if the number of subscribers go up to between 1,000 and 10,000, a bandwidth of 384 Kbps and 2 Mbps respectively will be needed. "By that time, you will
not be a neighbourhood ISP, but a large ISP, as many of the so- called big ISPs now have only that subscriber base," he laughs.

For dial-in lines for 100 subscribers, one should have at least 10 lines. If the subscriber base increases to 1,000-10,000, the number of dial-in lines goes up to 90 and 800 respectively.

All is good up to this stage. What about the economics of the proposal? Iyer says that hardware would cost not more than Rs 2.55 lakh: three PCs as terminal server, and primary and secondary servers for Rs 1.4 lakh; eight-port multi-port modem card for Rs 60,000; ISDN TA for Rs 15,000 and other equipment for Rs 20,000. The other fixed costs are Rs 20,000 for VSNL registration; Rs 24,000 for a DOT eight-analog line deposit; and Rs 15,000 for a DOT ISDN-line deposit.

As per Iyer's calculations, the annual costs works out to Rs 4.32 lakh: VSNL unlimited usage of 64 Kbps ISDN being Rs 1.6 lakh; DOT ISDN being Rs 2.19 lakh; DOT eight-analog line rental charges being Rs 24,000; and the balance going towards other incidentals.

"A performance guarantee of Rs 2 lakh should be given to DOT. I have not taken into account the cost of real estate, as the ISP in my mind would use one of the rooms in his house for the purpose," Iyer explains.

On the revenue side, he projects an annual revenue of Rs 6 lakh at Rs 500/subscriber/per month for unlimited access to the Net. The available connectivity time would be 70080 hours per annum on an eight lines/24 hours/365 days basis.

"With a value of $2,000 put on the head of each subscriber, the business valuation of an ISP with 100 subscribers goes to $2 lakh," he adds.

In conclusion, he suggests, "The other revenue sources are banner ads, services like web page hosting and the likes."